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Almost a quarter of employees say they’ll leave their job over salary and compensation. There are other factors at play, but this fact also highlights how important compensation is.
Compensation goes beyond the hourly wage or salary you pay someone. It includes pension plans, benefits, and so much more. Companies offering more comprehensive compensation can sometimes win talented employees from competitors.
If you want to keep your most valued team members, then it’s time to look at your compensation strategy. This guide will help you develop a better plan for both your business and your employees.
A Compensation Strategy Goes Beyond Salary
Many small business owners fall into the trap of thinking they have to offer higher wages to compete. For a cash-strapped business, this may feel like an impossible task.
If you can’t afford to give your employees a raise, that doesn’t mean you have to lose them, though. You just need to get creative.
A great example is offering employees stock in the company. This costs your business almost nothing upfront.
It offers your employees equity in the business. As it values, so too does their compensation.
This is a win-win situation. Employees who have stock options will be motivated to ensure the business succeeds. In turn, you can offer your employees better compensation and help drive productivity.
Offering stocks is relatively easy. All you need is to create shares, then use a stock certificate template to supply to employees.
This isn’t the only option, of course. You can also think about adding bonuses, which are tied to the business’s performance. In a good year, you’ll offer a larger bonus.
Many employers offer commission or performance-based incentives. An employee may be paid a base wage, but they can earn over and above if they perform well.
This is very common in performance-based positions, such as sales. If employees meet their sales goals, they may be rewarded.
If you plan to offer performance-based compensation, you’ll need to be sure you have a way to measure goals. Sales is easy because sales goals are measurable.
Other positions may have goals that are more difficult to measure. You can look at performance in terms of alignment with your business strategy. Are employees undertaking actions that align with your goals or corporate culture?
If so, reward them for this behavior.
Factor Time off into an Employee Compensation Strategy
Time is money, or so the old saying goes. Most employees certainly believe this. That’s one of the reasons you can offer employees more time off as part of your compensation strategy.
Instead of offering overtime, you may be able to offer time off “in lieu” of payment. You may reward employees with extra time off for performance, such as meeting a deadline.
Sick days and other types of time off are also highly valued. While you’ll be expected to pay employees for vacation days, sick days, and more. A more robust plan for time off is attractive to many employees.
Taking Care of Employees
Another pillar of a successful employee compensation strategy is the benefits you offer.
Health insurance is important to many people. Younger employees may want help with student debt or education opportunities. Older employees may be thinking about retirement.
Offering these sorts of benefits can help your employees reach their goals. They also show you care about the employee’s well being and their family. Today’s workers want to know they’re more than just a cog in the machine, and benefits and pensions can prove that.
They also make your compensation package more attractive to the talented people you want to hire. A competitor might offer a higher wage. A better benefits package might sway a job seeker to work for you instead.
Examine Your Budget
Offering higher wages and raises is still important. You can weigh those options against some of the other types of compensation we’ve discussed.
It may not be in your budget to offer a raise right now. Stock options or bonuses could help employees earn more if the business performs.
If you want to offer benefits, you can choose between a more robust health insurance option or higher raises. Either could help you find and keep talented employees.
Get Executive Buy-in
Once you’ve determined how you want to offer compensation to your employees, you’ll need executive buy-in.
If you’re the owner of the business, you may not need anyone’s approval but your bookkeeper’s. If you’re part of a management team, then you’ll need to get everyone on board with how to offer compensation.
You should be able to justify any decision you make about the types of compensation strategies your using. Performance-based incentives should be tied to measurable goals. Offering stock or bonuses is subject to executive approval.
Make Sure You’re Compliant
Before you put in place any change to your company’s compensation strategy, make sure you’re acting in line with the law. You may prefer to offer lieu time instead of paying overtime. The Fair Labor Standards Act may say you have to pay employees for extra time.
Following the law will help you avoid any penalties or lawsuits.
Conduct Compensation Audits
Once you’ve implemented a new employee compensation strategy, you’ll want to make sure it’s working for both your employees and your business.
Conducting regular audits will help. If performance-based bonuses are causing you to go over budget, it might be time to revise. If your employees aren’t using their health benefits, you should discover why and ask what you can offer instead.
These audits will help you see what’s working and what your employees like. In turn, you can continue fine-tuning strategic compensation to boost the business and keep the best of the best.
Getting Ready for Success
A better compensation strategy can help reduce employee turnover and increase productivity. In turn, you’ll be positioning your business for success.
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